Chapter 9 Location

Publisher Summary This chapter focuses on the most game-theoretic elements of location theory. Spatial competition is an expanding field lying at the interface of game theory, economics, and regional science. It is still in its infancy but attracts more and more scholars' interest because the competitive location problem emerges as a prototype of many economic situations involving interacting decision-makers. Space can be used as a "abel to deal with various problems encountered in industrial organization. The situations considered in this chapter do not exhaust the list of possible applications in that domain. Such a list would include intertemporal price discrimination and the supply of storage, competition between multiproduct firms, the incentive to innovate for imperfectly informed firms, the techniques of vertical restraints, the role of advertising, and incomplete markets due to spatial trading frictions. The location model is also well suited for analyzing nonprice competition. Firms are assumed to compete on other variables than prices; in particular, products specification appears as a basic decision variable in such a competitive environment. This model may also be useful for dealing with collective decision-making processes, like voting or competition between political parties.

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